In a world increasingly driven by social media, which incessantly taps into the fear of missing out (FOMO), it is easy to get caught up in the vortex of keeping up with trends. Gen Z, born into this digital era, is no stranger to this psychological impulse. However, a growing segment of this population has flipped the script on FOMO. Instead of opting for fleeting moments of gratification, they channel their energy into investments that promise long-term growth and financial security.
From the 2008 financial crisis, demonetization, and the 2020 health crisis to the recessionary years that spanned the next three years, including the high-speed UPI transition, this generation has seen it all. Despite this economic roller-coaster ride, as per a CAMS study, about 52% of first-time mutual fund investors are Gen Zoomers. This makes them investors among the key growth drivers of the Indian economy.
Navigating the risks of FOMO-driven investments
Many young investors enter the financial market, not out of a deep understanding of the fundamentals, but rather due to a fear of being left behind. While terms like FOMO or YOLO (you only live once) give an adrenaline rush and fuel excitement, they are not without inherent risks, and vital financial decisions cannot be made on their account. This psyche can trick you into impulsive decision-making and make you susceptible to market volatility.
How is Gen Z embracing FOMO and making responsible investments?
Gen Z does not only doom scroll on Instagram, but they are sitting on a goldmine of information and financial insights. According to a study conducted by the CFA Institute and the Financial Industry Regulatory Authority Investor Education Foundation (FINRA), 48% of Gen Zers named social media, and 30% named ‘finfluencers’ (financial influencers) as their primary go-to source for investment advice.
In the context of investing, the human psyche of FOMO has drawn individuals to high-risk, high-reward assets like stocks and cryptocurrencies. This motivates them to leverage investing apps like Stack’D to invest small amounts and watch it accrue compound interest. This generation of aspiring investors is navigating the challenges of the modern investment landscape responsibly. They are –
- Resisting the tunnel vision of short-term market hype
- Focusing on time-tested investment principles forging a long-term mindset
- Diversifying portfolios for wider market exposure
- Taking a disciplined approach to regular investing
How do Gen Z’s investment patterns differ from those of previous generations?
As with any generation, Gen Zers have a different perspective on investing. While the millennial generation prioritizes necessity and savings over expenses, Gen Z focuses on wealth creation and early retirement. This is a generation of risk-takers and experimenters who dive headfirst into capital markets and stocks. They are all about living life to the fullest while being mindful of their finances.
Investment strategies 101: A guide to making smart financial decisions for the Gen Z
Stepping up the financial game can be complex, especially for Gen Z, amid rising living costs and unprecedented economic shifts. Let’s take a peek into Gen Z’s guide to securing their future:
Start investing early to enable your money to compound. Even modest investments can grow and form substantial wealth over time. You can simply start by setting up SIPs on Stack’D and watch your wealth grow on autopilot mode.
Embrace ‘Loud Budgeting’, a concept that frees you from the societal pressure of spending money and gain control over your finances.
Diversify your portfolio across stocks, bonds, mutual funds, and ETFs via SIPs to limit the influence of market volatility.
Stay financially literate and keep your finger on the pulse of emerging investment opportunities and changes in financial laws.
While Gen Z leads an experience-oriented and dynamic lifestyle, find a balance between living in the moment and building a strong financial foundation.
Choose JOMO (joy of missing out) over FOMO, because impulsive purchases only create short-lived gratification and financial burnout over time. On the other hand, investing in Systematic Investment Plans (SIPs) can pave the path for goal-oriented investments and financial discipline.
No matter the avenue, this generation is determined to chart their territory toward wealth accumulation. Gen Z is rewriting the rules of financial success by prioritizing investments over splurges. So, what would your move be: keeping up with the fleeting trends or investing in a future that sets you apart?
Disclaimer: Mutual Funds investments are subject to market risk. Please read all the scheme-related documents carefully.
Frequently Asked Questions –
- What are some common challenges you might face while starting your investment journey?
While young investors are keen on investing, the investment journey is not without its hurdles:
- Risk Aversion: Given the volatile nature of the markets and the lack of a holistic understanding of risk management, the fear of losing money can deter first-time investors.
- Financial Literacy Gap: A lack of financial knowledge and investment-centric conversations can cause a gap in understanding.
- Limited Financial Resources: Student loans, debts, entry-level salaries, and tight budgets are factors that leave little room for investments. It can also create a misconception that investing is only for the wealthy, causing young adults to delay starting their investment journey.
- Influence Of Social Media: Social media can create unrealistic expectations of quick wealth, leading to impulsive and uninformed investment decisions.
- Navigating Tax Implications: Understanding the complexities of how investment impacts taxes, capital gains, or deductions can be confusing for first-timers, leading to unexpected liabilities.
- How does technology empower Gen Z to make smarter financial decisions?
The tech-savvy generation largely depends on technology to make informed financial decisions.
- Technology has lowered the entry barrier and increased accessibility to investments.
- Technology has democratized access to financial knowledge, offering engaging lessons on personal finance, investments, taxes, budgeting, and other financial concepts while also enabling individuals to learn at their own pace.
- User-friendly financial apps like Stack’D help in simplifying complex financial processes.
- The marriage of finance and technology has led to data-driven decisions, providing users with insights into spending habits, credit health, and investment opportunities.
